Digital Platform Dependency and MSME Business Performance: The Mediating Role of Digital Capability and Moderating Role of Differentiation Strategy

Abstract

This study investigates the effect of digital platform dependency on MSME business performance in Indonesia, with digital capability as a mediating variable and differentiation strategy as a moderating variable. The growing reliance of MSMEs on digital marketplace ecosystems (Tokopedia, Shopee, and similar platforms) has expanded rapidly, yet its implications for business performance remain underexplored. A quantitative approach with a cross-sectional survey design was employed, collecting data from 320 MSMEs actively using digital platforms in Indonesia. Data were analyzed using Partial Least Squares-Structural Equation Modeling (PLS-SEM). Findings reveal that: (1) digital platform dependency positively and significantly affects MSME performance; (2) digital capability partially mediates the relationship between digital platform dependency and MSME performance; and (3) differentiation strategy positively moderates the relationship between digital capability and MSME performance. These findings extend dynamic capability theory within digital ecosystem contexts and offer practical implications for MSMEs optimizing digital platform engagement.